CEO interview: Sneaker investment platform Rares introduces secondary market trading

“Investing in culture” - that’s the core concept of Rares, a sneaker investment platform set up by former NFL player, Gerome Sapp.

The platform allows users to invest in sneakers as they would do in typical stocks and provides sneaker enthusiasts an alternative to simply reselling shoes. In a discussion with FashionUnited, Sapp said the concept gives “people access to cultural relics that have somehow transcended into investment assets”.

“We feel like the cultures and communities that made these assets what they are, were at some point left out of the value appreciation of it,” Sapp added. “Rares is the platform that welcomes them back in and allows them to participate in the secondary value of a marketplace that they made popular and valuable.”

Now, the platform is expanding on its capabilities with the introduction of secondary market trading, enabling users to trade shares with others, which it said will increase liquidity as the volume of trading continues to grow. To kick off the new feature, Rares will be introducing the Shova 2010 Air Force 1 Hov, a Nike shoe made in collaboration with Jay-Z, with new styles to be unveiled on the platform as each pair sells out.

Secondary trading is the first of many announcements to come in 2022, the company said, as it looks towards a potential new funding round and the introduction of new asset classes to its offering.

Speaking with FashionUnited, Sapp gave a rundown of where the Rares concept came from, the value of the sneaker market and what to expect from this innovative idea.

Can you tell me a little bit about your background?

The story of Rares really has to start back in Housten, Texas, where I grew up with a single mother. I had experienced what a lack of access and opportunity really meant. I always wanted to solve the chasm between the two.

My passion for sneakers came about when my father went to prison. He bought me my first pair of Air Jordan 4 and from that moment on I was hooked. I was always a fan of Michael Jordan and what he represented to the Black community. Wearing Jordans meant success, they were more than just a sneaker.

I always knew, growing up, that the sneaker would go up in value, unlike other shoes. I knew it was a special asset class.

I was lucky enough to get an athletics scholarship at the University of Notre Dame, where I studied finance and played American football. I worked at Merrill Lynch during the summer, which is where I started to delve into corporate finance, however I was more interested in derivatives and other complex types of finance.

Fortunately, I was drafted into the NFL and played for six years, but during the off-seasons I spent my time at Harvard Business School, on a programme focused on finance and entrepreneurial studies. That was the first time I really started thinking about alternative assets.

Where did the idea for the platform come from?

Ironically, someone stepped on my Air Jordan 11s going to class and I remember wiping my shoe off and thinking “there must be a better way to derive value out of this sneaker besides wearing it”.

I knew sneakers were already a fast appreciating asset class, they were appreciating faster than gold and were rivalling traditional securities in terms of their return on investment. So, I thought, what if you could turn this into a stock and allow people to invest in sneakers the same way they would a stock. As the value of the sneaker increases, so does the value of the shares you own in that sneaker.

So, the sneaker market was a natural fit for you in comparison to other markets?

Absolutely, it was a natural conversion of my passions: sneakers and finance. I know sneakers like most people know whatever their day job is. And I spent my whole life in finance actually. So, it was natural for me to mix those two things.

Even though Rares will transfer into other alternative assets classes soon, sneakers were the one that I knew and most of my team knew. It was the one that got the most excitement out of people because sneakers are not only an appreciating asset class but they are fun to collect. It excites different emotional passions in people.

How does the platform actually work then?

We essentially created the first true stock market for collectible sneakers. We do that by allowing you to invest in fractional ownership of historically appreciating sneakers. You can come on our platform, just like you would any other marketplace where you go to make an investment, you choose a sneaker you like and then you simply invest in it.

The types of sneakers that we have on our platform are the ones that are historically appreciated. The sneakers that we deal with usually have given a 90 percent return on investment. Everything on our platform is something we feel will make our investors money. When they diversify their investment portfolio and they think about sneakers, making money has to be one of the things that they consider.

Who is the platform aimed at and who does it generally attract in the end?

Our demographic is 20 to almost 40 because we are tapping into several different things. One, we are tapping into people's desire to make money in new ways. After the pandemic, people realised that the stock market was just the stock market. A lot of people don’t really understand it and a lot of people have lost money in it. A lot of people look for alternative ways to make money via alternative asset investing. We are gathering those people who are interested in other ways of diversifying their investment portfolio.

Then, we have a big group of sneakerheads - actually, six billion dollars worth of people - who, in the real world, just flip sneakers all day long for money. They buy it low and sell it high. We just made their job easier. We attract that portion of the sneaker community.

But also, there are older people that use our platform for the nostalgic aspect of it. They are investing in a piece of their past happiness that happened to come in a pair of tennis shoes. It is a wide demographic, but the biggest reason people come to our platform is to potentially make money from sneaker investing.

Do you think it goes beyond just the money?

With alternative asset investing, it really taps into a personal connection. As I mentioned, the stock market for a lot of people, especially Gen Z, the newer generation coming up, they don’t really understand it and, for a lot of them, they don’t really think the stock market wants them to understand it. But, when you start talking about alternative assets, things that they are familiar with, things they can digest, there is a certain connectivity there that they feel comfortable investing in.

When polled, 79 percent of Gen Z have admitted to looking for alternative asset investment platforms to put money into online. People are looking to diversify their investments in things they are comfortable with, that are fractionalised and allow them to own a piece of it.

What shoe styles have you found to be the most popular? Do you often see links between value and cultural movements?

The biggest ones are Air Jordan 1s, especially 1985 Jordan 1s. Those shoes are classic and they will always increase in value. Those are the gold standard in the sneaker industry, simply because of the way the shoes are made. They were the shoes that really created this sneaker craze.

However, in reality, if it is a collaboration with an artist like Jay-Z or Kanye West, that really does have an effect on the resale value of sneakers. What an artist is doing in the real world has a dramatic effect on the value of the sneakers they have in the secondary resale market. For example, one of our best selling sneakers was a collaboration with Jay-Z and Air Force 1. Jay-Z made his money in music but now he is making it on the corporate side of music. People like him. So, when we offered that sneaker for IPO, that sneaker sold out within a day, simply because of who the sneaker was collabed with.

Do you specifically connect with these brands for the marketplace?

We do in some ways, but we don’t connect with the brands when we put the sneakers onto the platform. The brands are disconnected from what we do, even though they are connected in a lot of other ways. We just find the best shoes that we think will appreciate the most for our investors and we put those on the platform. As of now, we purchase those shoes and then we offer them up for investment. But, eventually, we will open the platform up to the community to put assets on it themselves.

With your successful funding round last year, what plans did you set out to achieve and have you already put some of those plans into action?

The biggest thing is just growth. Growth of our team, growth of our product offering and being more competitive in the marketplace. We have already started growing our team and we are still growing it, and we are actually starting to roll out new product offerings as well. We have started to hit some of the milestones we had planned for the funding round and we are actually gearing up for another funding round as well - that’s how fast we are growing.

You mentioned earlier that you were thinking about expanding the offering into other markets. Can you share what ideas you had in mind?

I think one of the biggest and broadest answers I can give you is that any alternative asset class is a game. Whether you are talking about vinyl records or trading cards or even non-fungible tokens (NFTs). We are really looking to scale and become the Amazon of alternative asset investment. We want people to be able to come to Rares and find whatever they want in terms of an alternative asset and make an investment in it and feel comfortable about that investment making them money. That is what we are going to eventually scale into and we have already started laying the groundwork for that.

Whether you are a collector and you want to put assets on the platform - we authenticate it, we securitise it for you - or we continue to branch out and put additional types of alternative assets on our platform, we want people to be able to come to Rares, click on a category and find sneakers, handbags, vinyl records, and make investments in those.

Our biggest goal is making our investors money, and allowing them to feel like when they come to Rares they have options, fun options. Ones they can relate to, not only from an investment standpoint but a personal standpoint. Things that they find interesting.